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TQP Development, LLC v. Wells Fargo & Co.

United States District Court, Fifth Circuit

December 2, 2013

TQP DEVELOPMENT, LLC,
v.
WELLS FARGO & CO., et al.,

CLAIM CONSTRUCTION MEMORANDUM AND ORDER

FREDERICK R. BUCKLES, Magistrate Judge.

After reviewing the arguments set forth in the parties' claim construction briefing (Dkt. Nos. 85, 87, and 94), the Court determined that oral argument on claim construction in the above-captioned case is unnecessary. Dkt. No. 105, 5/10/2013 Order. Upon consideration of the arguments briefed by the parties, the Court issues this Claim Construction Memorandum and Order.

Also before the Court is Defendants' Emergency Motion to Strike Untimely Extrinsic Evidence (Dkt. No. 99), Plaintiff's response (Dkt. No. 104 at Ex. A), and Defendants' reply (Dkt. No. 107).

BACKGROUND

Plaintiff asserts United States Patent No. 5, 412, 730 ("the 730 Patent"), titled "Encrypted Data Transmission System Employing Means for Randomly Altering the Encryption Keys." The 730 Patent issued on May 2, 1995, and bears a priority date of October 6, 1989.

The Court has construed the 730 Patent five times: TQP Development, LLC v. Merrill Lynch & Co., Inc., et al., No. 2:08-CV-471, Dkt. No. 383 (E.D. Tex. Mar. 28, 2011) (" Merrill Lynch I "); id., Dkt. No. 512 (May 19, 2012) (" Merrill Lynch II "); TQP Development, LLC v. Barclays PLC, et al., No. 2:09-CV-88, Dkt. 165 (E.D. Tex. Mar. 28, 2011) (" Barclays "); TQP Development, LLC v. Ticketmaster Entertainment, Inc., No. 2:09-CV-279, Dkt. No. 232 (E.D. Tex. Sept. 23, 2011) (" Ticketmaster "); and TQP Development, LLC v. 1-800-Flowers.com Inc., et al., No. 2:11-CV-248 (E.D. Tex. Mar. 20, 2013) (" 1-800-Flowers ").

In general, the '730 Patent relates to secure communication through the use of pseudo-random encryption keys. A sequence of pseudo-random keys is generated based on a seed value and an algorithm, and keys are selected depending upon the message data that is being sent over the transmission medium. The transmitter and receiver are thereby able to generate the same sequence of keys without the security risk of transmitting keys from the transmitter to the receiver or vice versa. The term "pseudo-random" means that the sequence has no apparent regularities unless the seed value and algorithm are known or determined. Merrill Lynch I at 23. The Abstract of the 730 Patent states:

A modem suitable for transmitting encrypted data over voice-grade telephone line. The modem is implemented by the combination of integrated circuit components including a microprocessor, a serial communications controller which communicates with connected data terminal equipment, and a modulator/demodulator for translating between voice band tone signals and digital data. Pseudo random number generators are employed at both the transmitting and receiving stations to supply identical sequences of encryption keys to a transmitting encoder and a receiving decoder. An initial random number seed value is made available to both stations. The random number generators are advanced at times determined by predetermined characteristics of the data being transmitted so that, after transmission has taken place, the common encryption key can be known only to the transmitting and receiving stations.

The 730 Patent, in its original form, contained one independent claim and one dependent claim. An Ex Parte Reexamination Certificate issued on September 20, 2011, confirming the original claims and adding eight more dependent claims.

Claim 1 of the 730 Patent recites:

1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of:
providing a seed value to both said transmitter and receiver,
generating a first sequence of pseudo-random key values based on said seed value at said transmitter, each new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link,
encrypting the data sent over said link at said transmitter in accordance with said first sequence,
generating a second sequence of pseudo-random key values based on said seed value at said receiver, each new key value in said sequence being produced at a time dependent upon said predetermined characteristic of said data transmitted over said link such that said first and second sequences are identical to one another[, ] a new one of said key values in said first and said second sequences being produced each time a predetermined number of said blocks are transmitted over said link, and
decrypting the data sent over said link at said receiver in accordance with said second sequence.

APPLICABLE LAW

"It is a bedrock principle' of patent law that the claims of a patent define the invention to which the patentee is entitled the right to exclude.'" Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc) (quoting Innova/Pure Water Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004)). To determine the meaning of the claims, courts start by considering the intrinsic evidence. See id. at 1313; C.R. Bard, Inc. v. U.S. Surgical Corp., 388 F.3d 858, 861 (Fed. Cir. 2004); Bell Atl. Network Servs., Inc. v. Covad Commc'ns Group, Inc., 262 F.3d 1258, 1267 (Fed. Cir. 2001). The intrinsic evidence includes the claims themselves, the specification, and the prosecution history. See Phillips, 415 F.3d at 1314; C.R. Bard, 388 F.3d at 861. Courts give claim terms their ordinary and accustomed meaning as understood by one of ordinary skill in the art at the time of the invention in the context of the entire patent. Phillips, 415 F.3d at 1312-13; Alloc, Inc. v. Int'l Trade Comm'n, 342 F.3d 1361, 1368 (Fed. Cir. 2003).

The claims themselves provide substantial guidance in determining the meaning of particular claim terms. Phillips, 415 F.3d at 1314. First, a term's context in the asserted claim can be very instructive. Id. Other asserted or unasserted claims can aid in determining the claim's meaning because claim terms are typically used consistently throughout the patent. Id. Differences among the claim terms can also assist in understanding a term's meaning. Id. For example, when a dependent claim adds a limitation to an independent claim, it is presumed that the independent claim does not include the limitation. Id. at 1314-15.

"[C]laims must be read in view of the specification, of which they are a part.'" Id. (quoting Markman v. Westview Instruments, Inc., 52 F.3d 967, 979 (Fed. Cir. 1995) (en banc)). "[T]he specification is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.'" Id. (quoting Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)); Teleflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1325 (Fed. Cir. 2002). This is true because a patentee may define his own terms, give a claim term a different meaning than the term would otherwise possess, or disclaim or disavow the claim scope. Phillips, 415 F.3d at 1316. In these situations, the inventor's lexicography governs. Id. The specification may also resolve the meaning of ambiguous claim terms "where the ordinary and accustomed meaning of the words used in the claims lack sufficient clarity to permit the scope of the claim to be ascertained from the words alone." Teleflex, 299 F.3d at 1325. But, "[a]lthough the specification may aid the court in interpreting the meaning of disputed claim language, particular embodiments and examples appearing in the specification will not generally be read into the claims." Comark Commc'ns, Inc. v. Harris Corp., 156 F.3d 1182, 1187 (Fed. Cir. 1998) (quoting Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1571 (Fed. Cir. 1988)); accord Phillips, 415 F.3d at 1323. The prosecution history is another tool to supply the proper context for claim construction because a patent applicant may also define a term in prosecuting the patent. Home Diagnostics, Inc., v. Lifescan, Inc., 381 F.3d 1352, 1356 (Fed. Cir. 2004) ("As in the case of the specification, a patent applicant may define a term in prosecuting a patent.").

Although extrinsic evidence can be useful, it is "less significant than the intrinsic record in determining the legally operative meaning of claim language." Phillips, 415 F.3d at 1317 (quoting C.R. Bard, 388 F.3d at 862). Technical dictionaries and treatises may help a court understand the underlying technology and the manner in which one skilled in the art might use claim terms, but technical dictionaries and treatises may provide definitions that are too broad or may not be indicative of how the term is used in the patent. Id. at 1318. Similarly, expert testimony may aid a court in understanding the underlying technology and determining the particular meaning of a term in the pertinent field, but an expert's conclusory, unsupported assertions as to a term's definition are entirely unhelpful to a court. Id. Generally, extrinsic evidence is "less reliable than the patent and its prosecution history in determining how to read claim terms." Id.

In general, prior claim construction proceedings involving the same patents-in-suit are "entitled to reasoned deference under the broad principals of stare decisis and the goals articulated by the Supreme Court in Markman, even though stare decisis may not be applicable per se. " Maurice Mitchell Innovations, LP v. Intel Corp., No. 2:04-CV-450, 2006 WL 1751779, at *4 (E.D. Tex. June 21, 2006). The Court nonetheless conducts an independent evaluation during claim construction proceedings. See, e.g., Texas Instruments, Inc. v. Linear Techs. Corp., 182 F.Supp.2d 580, 589-90 (E.D. Tex. 2002); Burns, Morris & Stewart Ltd. P'ship v. Masonite Int'l Corp., 401 F.Supp.2d 692, 697 (E.D. Tex. 2005); Orion IP, LLC v. Mercedes-Benz USA, LLC, 516 F.Supp.2d 720, 722-735 (E.D. Tex. 2007); Negotiated Data Solutions, Inc. v. Apple, Inc., No. 2:11-CV-390, 2012 WL 6494240 (E.D. Tex. Dec. 13, 2012).

MOTION TO STRIKE

Before the Court is Defendants' Emergency Motion to Strike Untimely Extrinsic Evidence. Dkt. No. 99. Also before the Court are Plaintiff's response (Dkt. No. 104 at Ex. A) and Defendants' reply (Dkt. No. 107).

Defendants requested expedited briefing and resolution of their motion in advance of the then-scheduled May 17, 2013 claim construction hearing. The Court later cancelled that hearing, finding that the claim construction disputes could be resolved on the briefing and without a hearing. Dkt. No. 105, 5/10/2013 Order. The Court therefore addresses Defendants' motion here, in the present Claim Construction Memorandum and Order.

Defendants move to strike the Declaration of Dr. Trent Jaeger, dated April 25, 2013, and filed as an attachment to Plaintiff's Reply Claim Construction Brief (Dkt. No. 94 at Ex. 2). Dkt. No. 99. Plaintiff did not disclose Dr. Jaeger's opinions in the Joint Claim Construction and Prehearing Statement, which is a filing required by Local Patent Rule ("P.R.") 4-3. Plaintiff responds that "[b]ecause [Plaintiff] did not, and could not, foresee Defendants' improper and inconsistent claim construction arguments, [Plaintiff] did not see the need to rebut Defendants' extrinsic evidence and only began to work with Dr. Jaeger on his rebuttal declaration on Monday[, ] April 22, 2013, after Defendants served their Defendants' Response Brief on Friday, April 19, 2013." Dkt. No. 104, Ex. A at 1. In particular, Plaintiff points to: "(1) a procedurally improper attempt to challenge the [730] Patent under 35 U.S.C. 101, under the guise of claim construction, and (2) a challenge to the Court's prior ruling that the applicant for the [730] patent did not disclaim stream ciphers.'" Id. at 2.

The Court addressed analogous circumstances in Lodsys, LLC v. Brother Int'l Corp., No. 2:11-cv-90, Dkt. No. 573 (E.D. Tex. Mar. 12, 2013) (Gilstrap, J.). Plaintiff failed to disclose the extrinsic expert opinions of Dr. Jaeger before the start of claim construction briefing, as required by P.R. 4-3(b). Indeed, Plaintiff waited until its Reply Claim Construction Brief to submit a declaration by Dr. Jaeger or to even identify Dr. Jaeger.

Defendants also move to strike an extrinsic dictionary definition of "algorithm" from The Harper Collins Dictionary of Computer Terms that Plaintiff attached to its Reply Claim Construction Brief (Dkt. No. 94 at Ex. 1). Dkt. No. 99. Here, too, Plaintiff failed to comply with the disclosure requirements of the Local Patent Rules.

Plaintiff relies upon P.R. 4-5(c) as well as Syntrix Biosystems, Inc. v. Illumina, Inc., No. C10-5870, 2013 WL 496061, 2013 U.S. Dist. LEXIS 17023 (W.D. Wash. Feb. 7, 2013) and Competitive Technologies v. Fujitsu Ltd., 286 F.Supp.2d 1161 (N.D. Cal. 2003).

Local Patent Rule 4-5(c) states: "Not later than 7 days after service upon it of a responsive brief, the party claiming patent infringement shall serve and file any reply brief and any evidence directly rebutting the supporting evidence contained in an opposing party's response."

Syntrix and Competitive Technologies are non-binding authorities and are ultimately unpersuasive in light of the analysis of Lodsys, which found that a "wait-and-see" approach to preparing an expert declaration is prohibited by P.R. 4-3. See No. 2:11-cv-90, Dkt. No. 573 at 3. Also of note, Syntrix relied upon the "rule for disclosure of rebuttal evidence" but provided no analysis, and in Competitive Technologies the expert at issue had at least been timely identified. 2013 WL 496061, at *4; 286 F.Supp.2d at 1168-69. On balance, Plaintiff has failed to demonstrate that the allowance for rebuttal evidence under P.R. 4-5(c) should trump the requirement for disclosure of expert opinions under P.R. 4-3(b). Defendants' motion to strike is therefore granted.

Alternatively, upon review of Dr. Jaeger's declaration and the definition of "algorithm" in The Harper Collins Dictionary of Computer Terms, the Court finds that Plaintiff's untimely evidence would not alter the Court's analysis, set forth herein, even if the Court were to deny Defendants' motion to strike.

CONSTRUCTION OF AGREED TERMS

Dkt. No. 85 at 3-4; Dkt. No. 87 at 5-6.

CONSTRUCTION OF DISPUTED TERMS

As a preliminary matter, Plaintiff's opening brief proposed, without argument, that the Court adopt several of its prior constructions "for consistency." See Dkt. No. 85 at 4. The terms at issue are: (1) "data being transmitted over said link"; (2) "predetermined number of said blocks"; (3) "a new key value in the first sequence is produced each time a condition based on a predetermined characteristic of the transmitted data is met at the transmitter"; and (4) "a new key value in the second sequence is produced each time a condition based on a predetermined characteristic of the transmitted data is met at the receiver." Id. at 4-5.

Plaintiff did not include these terms as disputed terms requiring construction in the Local P.R. 4-3 Joint Claim Construction and Prehearing Statement. See Dkt. No. 80 at Ex. B. Likewise, these terms do not appear as distinct disputed terms in the parties P.R. 4-5(d) Joint Claim Construction Chart. See Dkt. No. 102 at Ex. A. Because these terms have not been presented to the Court as agreed terms or as disputed terms requiring construction, the Court does not address these terms.

Plaintiff also urges that good cause must be shown for a party to submit a previously construed term for construction. Dkt. No. 85 at 5 (citing Uniloc USA, Inc. v. Sony Corp. of Am., Nos. 6:10-CV-373, -471, -472, -591, -636, -691, 6:11-CV-33, 2011 WL 1980214, at *3, 2011 U.S. Dist. LEXIS 54547, at *31 (E.D. Tex. May 20, 2011)). Such a requirement is not present in the Court's Local Patent Rules, or in any binding authority identified by the parties, and shall not be imposed for the above-captioned case.

Finally, Defendants have argued that to the extent an expert's opinions regarding claim construction are not properly contested by an opposing party's expert, the expert's opinions should be adopted. Dkt. No. 87 at 1 & n.1 (citing Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F.3d 1348 (Fed. Cir. 2013)). The Court is not aware, however, of any authority holding that an expert's opinions should trump the Court's own consideration of all relevant evidence, particularly the intrinsic evidence. See Phillips, 415 F.3d at 1318 ("[A] court should discount any expert testimony that is clearly at odds with the claim construction mandated by the claims themselves, the written description, and the prosecution history, in other words, with the written record of the patent.") (internal quotation marks omitted).

A. "predetermined"

Dkt. No. 102, Ex. A at 1.

(1) The Parties' Positions

Plaintiff argues that "[t]he term predetermined' is a commonly used term and does not need any construction" and "simply means to determine beforehand." Dkt. No. 85 at 11 (citing Ex. F, Merriam-Webster Dictionary (on-line version)). Alternatively, Plaintiff proposes the construction adopted by the Court in 1-800-Flowers. See 1-800-Flowers at 34. Plaintiff urges that Defendants' proposal would improperly narrow the claims in situations, for example, where unencrypted data is transmitted before any encrypted data is transmitted. Id. at 12. Plaintiff further argues that Defendants' proposal to exclude "an inherent property of the encryption or key-generation algorithms" is ambiguous and confusing and has "no basis in the claims, specification or intrinsic record." Id.

Defendants respond that Plaintiff is attempting to recapture what Plaintiff distinguished during prosecution, namely the prior art "stream cipher" techniques that involve "producing a new pseudo-random key' value (based on a seed) to encrypt each unit of data." Dkt. No. 87 at 6. Defendants submit that if such prior art techniques were found to be within the claim scope, then Claim 1 is invalid. Defendants also urge that because the term "predetermined" was added during prosecution, that term must carry some meaning, to wit, "determined before." Id. at 7 (internal quotation marks omitted). Defendants further argue that the predetermined values cannot be inherent properties of the algorithms because the specification explains that the values are "not known to would-be attackers." Id. at 7-8. Defendants emphasize that the prior art stream ciphers involved changing to a new key value for each data unit and therefore did not involve any "predetermined" interval. Id. at 8; see Dkt. No. 80, Ex. D, Franklin Decl., e.g., at ΒΆ 36.

Plaintiff replies that "predetermined" is unambiguous and that no prosecution disclaimer occurred because "the applicant simply complied with the Examiner's unexplained instructions to rewrite application claim 8 with the limitations of application claims 9 and 10." Dkt. No. 94 at 3. Plaintiff also reiterates that Defendants' proposal is ambiguous. Id. at 4-5.

(2) Analysis

Although Plaintiff argues that this term should not be construed, the briefing demonstrates that the parties have a "fundamental dispute regarding the scope of a claim term, " and the Court has a duty to resolve the dispute. O2 Micro Int'l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1362-63 (Fed. Cir. 2008).

Claim 1 recites (emphasis added):

1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of:
providing a seed value to both said transmitter and receiver,
generating a first sequence of pseudo-random key values based on said seed value at said transmitter, each new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link,
encrypting the data sent over said link at said transmitter in accordance with said first sequence,
generating a second sequence of pseudo-random key values based on said seed value at said receiver, each new key value in said sequence being produced at a time dependent upon said predetermined characteristic of said data transmitted over said link such that said first and second sequences are identical to one another[, ] a new one of said key values in said first and said second sequences being produced each time a predetermined number of said blocks are transmitted over said link, and
decrypting the data sent over said link at said receiver in accordance with said second sequence.

Defendants have relied upon prosecution history concerning the "Feistel" reference, United States Patent No. 4, 316, 055. "[T]he prosecution history (or file wrapper) limits the interpretation of claims so as to exclude any interpretation that may have been disclaimed or disavowed during prosecution in order to obtain claim allowance." Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 448, 452 (Fed. Cir. 1985). In Barclays, this Court considered and rejected the same argument. Barclays at 13-14. The Court reaches the same conclusion here and finds no definitive statements by the patentee that would warrant a finding of prosecution disclaimer. Omega Eng. v. Raytek Corp., 334 F.3d 1314, 1324 (Fed. Cir. 2003) ("As a basic principle of claim interpretation, prosecution disclaimer promotes the public notice function of the intrinsic evidence and protects the public's reliance on definitive statements made during prosecution.") (emphasis added).

Nonetheless, the specification discloses that for encryption and decryption to occur, certain information must be provided to the transmitter and the receiver "in advance":

In accordance with the invention, to permit the two stations to communicate, each [is] supplied in advance with a random number seed value which exclusively determines the numerical content of the sequence of numeric values generated by each of the two pseudo-random generators. In order that the two generators switch from one output key value to the next in synchronism, means are employed at both the transmitting and receiving stations to monitor the flow of transmitted data and to advance the random number generator each time the transmitted data satisfies a predetermined condition.
The monitoring function can advantageously be performed simply by counting the units of data being transmitted and by advancing each pseudo-random key generator each time the count reaches an agreed-upon interval number. In this way, no additional synchronization information needs to be added to the data stream.

730 Patent at 1:43-59 (emphasis added).

Once the host station has supplied the initial seed value keys to the units forming the two terminal locations for a given link and transmission over that link begins, the host... no longer "knows" the encryption key values since they are dependent upon the nature of the transmissions over the link. Consequently, link security cannot be compromised even by an "insider" who is in possession of the initial key values supplied by the host.

Id. at 2:17-25 (emphasis added).

Of course, in order for the receiving station to successfully decipher the incoming cipher text, the receiving station 12 must be provided (in some fashion) with both the correct seed value and the correct interval number. These values are supplied to the receiving station in advance of the transmission by any secure means.

Id. at 4:13-20.

As found in Ticketmaster, these disclosures, as well as the plain language of the claim, are consistent with construing "predetermined" to refer to a determination that occurs before any communication involving data comprising a sequence of blocks that have been encrypted using the recited pseudo-random key values. Otherwise, the recited sequences of pseudo-random keys could not be produced and, in turn, the data could not be encrypted.

Finally, Defendants' have cited the Court's analysis in Calypso Wireless, Inc. v. T-Mobile USA Inc., No. 2:08-CV-441, Dkt. No. 309 (E.D. Tex. Jan. 15, 2013). In Calypso, the Court addressed whether the term "predetermined, maximum distance" could refer to the range inherent in any wireless system. Calypso involved a different patent and different technical issues. On balance, the Court's analysis in Calypso is not relevant to construing the term "predetermined" in the above-captioned case and does not warrant importing a limitation that "predetermined" excludes any and all "inherent propert[ies] of the encryption or key-generation algorithms, " as Defendants have proposed.

The Court therefore hereby construes "predetermined" to mean "determined before any communication of a sequence of encrypted blocks."

B. "a new one of said key values in said first and second sequences being produced each time a predetermined number of said blocks are transmitted over said link"

used

Dkt. No. 102, Ex. A at 1; Dkt. No. 85 at 6 ...


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